University capabilities in facilitating entrepreneurship: A longitudinal study of spin-off ventures at mid-range universities
Introduction
Many countries are undertaking university reform with a view toward increased commercialization of the results of public research (Wright et al., 2007). Universities are setting up institutional arrangements such as technology transfer offices (TTOs), incubators, entrepreneurship centers, and internal seed funds to increase the commercialization of research (Rasmussen et al., 2006). In particular, many countries and universities have emphasized the creation of university spin-off firms (USOs) as an important tool for the commercialization of research (Shane, 2004, Wright et al., 2007). The growing interest in USOs among policy makers and the large amount of resources used to support USOs (Lockett and Wright, 2005) call for more research to better understand how universities can facilitate the creation of new research-based ventures (Markman et al., 2008). In this paper, a USO is defined as a new venture initiated within a university setting and based on technology derived from university research. By following four start-up processes longitudinally, this paper seeks to elucidate the types of capabilities in the university context that promote the initiation and early development of USOs.
University characteristics leading to USO formation have been extensively studied. For example, it has been found that higher R&D expenditures (Lockett and Wright, 2005), intellectual eminence (Di Gregorio and Shane, 2003), specific research fields (O'Shea et al., 2005), older TTOs (Powers and McDougall, 2005), more resources invested in TTO personnel (O'Shea et al., 2005), and having a culture that supports USOs (Franklin et al., 2001) all make a university more likely to have a high USO rate.
Most of these factors explain the characteristics of environments that facilitate USOs but provide little information about how such environments are created. As several studies have pointed out, the ability of universities to create USOs is path dependent (Kenney and Goe, 2004, O'Shea et al., 2005) and is likely to be a result of a historically high USO rate (Shane, 2004) and favorable regional conditions (Roberts and Malone, 1996). Thus, the characteristics and conditions of successful universities such as MIT (O'Shea et al., 2007) may be impossible for other universities to emulate. Still, USO activity does take place in less-developed regions (Benneworth and Charles, 2005, Degroof and Roberts, 2004) and mid-range universities (Wright et al., 2008). Consequently, we propose that despite having unfavorable characteristics, many universities may be able to develop capabilities that increase their spin-off rate. More specifically, we investigated the following two research questions: What are the university capabilities that facilitate the process of USO firm formation? and How can universities develop such capabilities?
This knowledge is highly relevant for universities and policy makers seeking to increase the rate of USO formation. Most universities are not situated in a region with a strong entrepreneurial community for high-technology ventures and thus need to play a proactive incubation role by supporting USOs throughout their stages of development (Clarysse et al., 2005, Degroof and Roberts, 2004).
The identification of these university capabilities presents a significant methodological challenge. Several studies have provided important insight by using the university as the unit of analysis (Lockett and Wright, 2005, O'Shea et al., 2007), but how the universities actually contribute to the new-venture-creation process of USOs has been understudied. By using the venturing process as a unit of observation, this study keyed into the capabilities of universities and how they actually influence the initiation and early development of USOs. Prior studies have typically relied on cross-sectional data and retrospectively deduced the factors leading to the creation of new USOs. To observe this process more closely, our study followed the entrepreneurial process longitudinally. We analyzed the initial phases of the USO process from the recognition of the emerging business idea up to the launch of an independent new firm. These initial phases are crucial for the further development of USOs (Heirman and Clarysse, 2004) and are highly influenced by the university context from which they emerge (Moray and Clarysse, 2005).
In responding to the request for more fine-grained qualitative studies of the mechanisms leading to USO firm formation (O'Shea et al., 2005), we have made several contributions to the academic entrepreneurship literature. We looked beyond specific university characteristics and resources and identified a set of university capabilities that are likely to increase USO firm formation. Using a capability framework to guide our study, we developed a theory that improves the understanding of how specific university characteristics and incubation strategies are linked to university spin-off activity. Moreover, by using the USO-formation process as a unit of observation and collecting longitudinal data at both the firm and university levels, we have responded to the recent calls for more multi-level and holistic perspectives on university entrepreneurship (Mustar et al., 2006, Rothaermel et al., 2007). Our longitudinal study of emerging USOs contributes to our understanding of the role of different capabilities related to different phases and activities in the USO process. Finally, by studying four USOs from two European mid-range universities (Wright et al., 2008), we add to those empirical studies that focus on USO activity from strong research universities typically situated in high-technology regions in the US.
The next section outlines the capability perspective as a theoretical framework for analyzing the challenges of USO development within a university organization. The development processes of four USOs were analyzed to reveal how the university context influenced their development. Based on these cases, we propose three university capabilities that facilitate the process of creating USOs and derive propositions related to how universities can develop these capabilities. Finally, implications for further research and practice are provided.
Section snippets
The rationale for a capability perspective
A large share of the studies of entrepreneurial activity at the university level is based on cross-sectional data linking university characteristics with USO creation. Such studies imply that an increase in these characteristics should lead to the creation of more USOs. This knowledge is useful in predicting USO formation and gives important insight into favorable conditions, but it does not explain how USOs are created. USOs are heterogeneous (Mustar et al., 2006), and a too-static view of the
Methodology
A longitudinal case-study design was chosen to key into the USO-development process and its different activities (Eisenhardt, 1989). This approach allowed for richer contextual insight and an in-depth understanding of a process that has been scarcely investigated in prior studies (Rothaermel et al., 2007).
Findings
Table 4 outlines some characteristics observed in the four USOs as they emerged and developed within the university context. The founders, the university, and a number of public and private actors played significant roles throughout the venturing process.
All four USOs emerged from basic research activities and were initiated by creative and experimental behavior by academics. As a result, the university's emphasis on academic freedom, flexible conditions for doing fundamental research, and
Analysis: types of university capabilities
The purpose of this study was to reveal how universities influence the start-up process of nascent USOs and thereby identify the university capabilities facilitating USO firm formation. In Section 2, we proposed that a university's capabilities should facilitate the exploration of new business opportunities based on academic research and the acquisition of resources to exploit these opportunities. Moreover, a particular challenge for new ventures emerging from within a university context is to
Discussion and implications
By examining the establishment of four USOs longitudinally, this study contributes to the understanding of universities’ capabilities that facilitate new USO venture formation, as well as to the understanding of how universities can develop these capabilities. Based on a capability approach, we proposed three specific university capabilities that facilitate the USO-creation process: capabilities that open new paths of action, capabilities that balance academic and commercial interests, and
Conclusions
In conclusion, adopting a capability perspective allowed us to gain insight into a complex, dynamic, and multi-level process that is poorly understood. By focusing on the early phases of venture creation and the particular context of mid-range universities, which have been infrequently studied, we were able to develop insights about how universities can facilitate the process of USO creation in environments with a weak entrepreneurial infrastructure. It appears that universities can develop
Acknowledgements
We would like to thank Paul Westhead and three anonymous reviewers for valuable feedback on earlier versions of this paper, as well as the interviewees for sharing their stories and insights.
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